LESSON 2 – 3 These are the accountant’s interpretation on the Financial Statement.

PERSONAL FINANCE FINANCE

 It is the activity of managing your own money.
Can be defined as the art and science of managing money.
PERSONAL FINANCIAL PLANNING
4 KEY FINANCIAL STATEMENTS
 A planning which helps the individual define the
financial goals and develop strategies to reach them. 1. INCOME STATEMENT
Sometimes called Statement of Operations / Statement of
Comprehensive Income.
FINANCIAL GOALS 2. BALANCE SHEET
 Results that an individual wants to attain, such as buying a It is summary statement of the firm’s financial position at a given point
home, building a college fund, or achieving financial in time.
independence. 3. STATEMENT OF RETAINED EARNINGS
4. STATEMETN OF CASH FLOW
MONEY
 Is the medium of exchange used to measure value in STATEMENT OF FINANCIAL POSITION
financial transactions. (CURRENT ASSETS)
MONEY AND RELATIONSHIPS
 Marriage killing money issues. Expected to be converted into cash within 1 year or less.
1. CASH
GOAL DATES  Most basic and familiar of all assets.
 Target dates in the future when certain financial objectives 2. ACCOUNTS RECEIVABLE
are expected to be completed.  Are oral promises to the entity to receive cash at a later date.
3. SHORT – TERM INVESTMENT
TYPES OF FINANCIAL GOALS  Marketable securities are very liquid short – term
LONG – TERM GOALS investments, such as U.S Treasure bills or certificates of
 Long – term financial goals covering about 6 years out to deposit, held by the firm.
the next 30 or 40 years. 4. NOTES RECEIVABLE
SHORT – TERM GOALS  Also called promissory notes.
 Are set each year and cover a 12 – months period. 5. MERCHANDISE INVENTORIES
INTERMEDIATE GOALS  Refers to the merchandise of the company intended for sale
 Are set for 2 – 5 years. in the course of its business operation.
6. PREPAYMENTS
 Is an amount simply paid in advance for goods or services
CAREER anticipated to be received by the entity in the future.
 A job which a person trained and in which it is possible to
advance during your working life, so that you get greater NON – CURRENT ASSETS
responsibility and earn more money.
CAREER PLANNING 1. FIXED ASSETS
 Through careful career planning, you can improve your  They are expected to not be converted into cash immediately
work situation to gain greater personal and professional and are regularly placed as a means of production.
satisfaction. (EXAMPLES: property, plant, and equipment)
2. LAND
 It is classified as an investment.
3. BUILDING
 The infrastructure owned by the company that is used in
LESSON 4 – 5 business.
4. INTANGIBLE ASSETS
ACCOUNTING  Being intangible, their value and assets are harder to measure
and evaluate, compared to tangible assets. (EXAMPLES:
 Is system that identifies, records, and communicates relevant patents, copyright, , goodwill, trademarks and licenses)
economic events to interested users and provide the quantitative 5. OTHER ASSETS
information.  All remaining items which do not fall into any of the
accounts mentioned above.
4 PHASES OF ACCOUNTING
1. RECORDING
This is technically called bookkeeping.
CHRONOLOGICAL
 Transactions should be recorded in accordance with the date
of the business transactions, from the first day of the month
to the last day of the month.
2. CLASSIFYING
Means the sorting of business transactions to their specific accounts.
3. SUMMARIZING
After each accounting period, data recorded is summarized through
financial statements.
4. INTERPRETING

STATEMENT OF FINANCIAL POSITION (LIABILITIES)
CURRENT LIABILITIES
Expected to be paid within 1 year or less.
NON – CURRENT LIABILITIES
Expects to settle after more than a year or have the legal or
contractual capacity to defer payment accordingly.
1. ACCOUNTS PAYABLE
 Represent the liability accounts of the company, arising from
purchase of merchandise that is intended for sale.
2. NOTES PAYABLE
 Tend to have longer maturity dates than accounts payable.
3. ACCRUED LIABILITY
 An accrued liability is an obligation that an entity has
assumed, usually in the absence of a confirming document,
such as a supplier invoice.
STATEMENT OF FINANCIAL POSITION (EQUITY)
Is the residual interest of the owners in the assets of the business
after considering all liabilities.
1. CAPITAL STOCK
 Capital stock is comprised of all types of shares issued by a
corporation.
2. ADDITIONAL PAID – IN CAPITAL
 Additional paid – in capital is any payment received from
investors for stocks that exceeds the par value of the stock.
3. RETAINED EARNINGS
 Retained earnings are the profits that a company has earned
to date, less any dividends or other distributions paid to
investors.
REVENEUE
The amounts received by a business earned as a result of selling
something or rendering a service.
1. OPERATING REVENUE
 Revenues that originate from main business operations
(EXAMPLES: sales, service revenue)
2. NON – OPERATING REVENUE
 Revenues that do not originate from main business operations
and are a result of some side activities (EXAMPLES: interest
revenue, rent revenue)
EXAMPLES OF REVENUES ACCOUNTS
1. SALES REVENUE
 Main source of revenue for businesses that sell products
(EXAMPLES: supermarkets, convenience stores, food
manufacturers)
2. SERVICE REVENUE
 Main source of revenue for businesses that render services
(EXAMPLES: barber shops, accounting firms)
3. INTEREST REVENUE
 Revenue earned as a result of investment in debt securities or
receivables from other entities.
4. DIVIDEND REVENUE
 Revenue earned as a result of dividend declaration of a
company where in a business has invested stocks.
5. CONTRIBUTIONS REVENUE
 Revenue earned by not – for – profit organizations is usually
in the form of donations by outside parties.
STATEMENT OF RETAINED EARNINGS
Reconciles the net income earned during a given year and any
cash dividends paid, within the change in retained earnings
between the start and the end of that year.
STATEMENT OF CASH FLOW
Provides a summary of the firm’s operating, investment and
financing cash flows and reconciles them with changes in its cash
and marketable securities during the period.
WEEK 6 – 7 BUDGETING PROCESS, ESTIMATING ICOME
AND EXPENSES
BUDGET
 Is a short – term financial planning report that helps you
achieve your short – term financial goals.
CASH BUDGET
 A budget that takes into account estimated monthly cash
receipts and cash expenses for the coming year.
A CASH BUDGET IS A VALUABLE MONEY
MANAGEMENT TOOL THAT HELP YOU:
1. Maintain the necessary information to monitor and
control your finances.
2. Decide how to allocate your income to reach financial
goals.
3. Implement a system of disciplined spending – as
opposed to just existing from one paycheck to the next.
4. Reduce needles spending so you can increase the funds
allocated to savings and investments.
5. Achieve your long – term financial goals.
BUDGET CONTROL SCHEDULE
 A summary that shows how actual income and expenses
compare with the various budget categories and where
variances (surpluses or deficits) exist.
DEALING WITH DEFICITS
1. Liquidate enough savings and investments or borrow
enough to meet the total budget shortfall for the year.
2. Cut low – priority expenses from the budget.
3. Increase income.
WEEK 8 SAVINGS, LOANS, AND CREDIT CARDS
BASIC DEPOSIT ACCOUNT
 This refers to interest – or non – interest – bearing deposits
which are withdrawable upon demand thru available bank
channels.
TYPES OF SAVINGS DEPOSITS
1. REGULAR SAVINGS ACOOUNT
2. KIDDIE AND TEENS SAVINGS ACCOUNT
3. BASIC DEPOSIT ACCOUNT
4. OTHER SAVINGS ACCOUNT
LOANS
 A loan is money, property, or other material goods given to
another party in exchange for future repayment of the loan
value or principal amount, along with interest or finance
charges. A loan may be for a specific, one – time amount or
can be available as an open – ended line of credit up to a
specified limit or ceiling amount.
CURRENT ACCOUNTS
 Is used for regular and frequent money transactions like
paying bills, tuition, and rent.

FIXED DEPOSIT ACCOUNTS

 Or “FD”, is a type of savings/ investment account that
promises the investor a fixed rate of interest.

CREDIT CARDS
 A credit card is a thin rectangular slab of plastic issued by a
financial company, that lets cardholders borrow funds with
which to pay for goods and services.
LINE OF CREDIT
 The credit company provider may also grant a line
of credit (LOC) to cardholders, enabling them to
borrow money in the form of cash advances.
Issuers customarily per – set borrowing limits,
based on an individual’s credit rating.
AUTOMATED TELLER MACHINE
 Is an electronic banking outlet that allows customers to
complete basic transactions without the aid of a branch
representative or teller.
SMART CARD
 Smart cards are used for a variety of applications, though
most commonly are used for credit cards and other payment
cards. Distribution of smart cards in recent years has been
driven by the payment card industry’s move to support smart
cards for the EMV payment card standard. Smart cards
capable of short – range wireless connectivity can also be
used for contactless payment systems; they can also be used
as tokens for multifactor authentication.
PAYROLL CARD
 Is a prepaid card onto which an employer loads an
employee’s salary each payday. Payroll cards are an
alternative to direct deposit or paper checks.

SIMPLE INTEREST
 Is interest on the amount invested or borrowed at a given rate
and for a given time.
I = PRT
MATURITY VALUE
F=P+I
 F = is the total amount the borrower would need to pay back
is given by the formula.
R = I/ PT

P = I/ RT

T = I / PR